Energy and resources as production factors in process industries

It is shown that, when the mean productivity of some factors, such as energy or materials, is upperly bounded (a condition usually arising in energy production or in the process industries where energy takes part in physico-chemical processes), the production function may not be convex and, under some further conditions, is concave. Consequences of this model on the economics of energy savings are examined, and it is shown that energy savings may be considered at three levels: in the short run, by action on labour factors: in the medium run, by investment and action on labour factors; in the long run, by technological innovation, investment in new technologies and action on labour factors. Empirical findings along these lines are thus confirmed.